Monthly Archives: Ottobre 2019

The journal entry to record the amortization of an intangible asset includes a ___. Morris Lest, Inc. sold its truck and received less cash than the truck's book value. The net effect of this sale on the accounting equation is a ____. IP PINs are six-digit numbers assigned to taxpayers to help prevent the misuse of their SSNs on fraudulent federal income tax returns.

Each transaction participated in by a company is recorded in a manner where something of monetary value is received and something of equal value is given up. The expression double entry reflects the fact that at least two different financial statement accounts are affected when each transaction is recorded. The counterbalancing effect is inherent to the accrual method of financial reporting because estimates and judgments made by management to prepare the financial statements in one period tend to reverse themselves in later periods.

Goodwill Amortization and the Usefulness of Earnings

Each of the eight categories is then linked with an allowable depreciation method. Inventory turnover measures the speed with which inventories move through operations. This activity ratio compares the amount of inventory carried by a company to the volume of goods sold during the period, reflecting how quickly, in general, inventories are sold. By dividing this ratio into 365 days, it can be converted to an expression indicating how many days it takes, on average, to turn over the inventory.

• Writing off bad debt does not affect a company's accounts receivable balance.
• B. Explain why you debited and credited the accounts you did.
• Therefore, 70% of the additional depreciation is treated as ordinary income.
• The asset is then depreciated, and the effective interest method is used to amortize the liability as the lease payments are made.
• Amortization stops when the cost of the asset has been booked to expense.
• Immediately after the transfer, you control the corporation.

For example, a 5 percent stock dividend declared by a company with 100,000 shares outstanding would involve the issuance of 5,000 (100,000 × 0.05) new shares to the stockholders. Under an ordinary stock dividend, the number of shares issued represents less than 25 percent of the number of shares outstanding before the issuance. Ordinary stock dividends are also just called stock dividends. Operating transactions are usual and frequent transactions involving the acquisition and sale of a company’s inventories or services. Misclassification involves including a financial statement account in an inappropriate section of the financial statements. An installment obligation requires periodic payments covering both interest and principal.

Amortization for Tax Purposes

After a year, company BB tests its assets for impairment and finds out that company CC’s revenue has been declining significantly. As a result, the current value of company CC’s assets has decreased from $10M to $7M, having an impairment to the assets of $3M. This makes the value of the asset of goodwill drop down from $5M to $2M. A similar entry would be made to record amortization expense for each type of intangible asset. The entry would include a debit to amortization expense and a credit to the accumulated amortization or intangible asset account. Intangible assets can also include internet domain names, service contracts, computer software, blueprints, manuscripts,joint ventures, medical records, and permits.

• If the purchase price paid is less than the target's net asset value, the acquirer records a one-time gain equal to the difference on its income statement.
• Earnings persistence is the extent to which a particular earnings dollar amount can be expected to continue in the future and thus generate future cash flows.
• Some of the listed transactions have been ones we have seen throughout this chapter.
• The contracting parties should agree on the specific amount of severance damages in writing.

If you cannot deine which part of your expenses is for each part of the condemnation proceeds, you must make a proportionate allocation. To figure your net severance damages, you first must reduce your severance damages by your expenses in obtaining the damages. You then reduce them by any special assessment levied against the remaining part of the property and retained out of the award by the condemning authority.

Everything You Need To Master Financial Modeling

https://toolguider.com/top-5-gold-metal-detector-for-gold-hunters/ treated as ordinary income under section 1245 of the Internal Revenue Code. Ten times your basis in all qualified stock of the issuer you sold or exchanged during the year.

https://www.sat.uz/2008/03/27/page,2,iptv-neobkhodimost-standartizacii.html revenue represents revenues from the provision of services. This account is normally found in the operating section of the income statement. A realized gain or loss occurs when an asset is exchanged for another asset with a market value that differs from the book value of the asset given up.

Structuring the Deal: Tax and Accounting Considerations

1Cash and accounts receivable, reduced for bad debt and returns, are valued at their values on the books of the target on the acquisition date. Furthermore, one must remain cautious while expending costs related to upgrades or repairs. If an item’s value improves notably or the item’s lifespan increases, the costs may better be capitalized. As R&D costs are usually taken as an expense, some legal fees related to the asset’s acquisition can be capitalized, coupled with the patent fees.

Involuntary conversions are also called involuntary exchanges. If the abandoned property is secured by debt, special rules apply. The tax consequences of abandonment of property that is secured by debt depend on whether you are personally liable for the debt or you are not personally liable for the debt . For more information, including examples, see chapter 3 of Pub.

Goodwill

An independent audit occurs if the audit is conducted in an unbiased manner by an auditor with no personal, financial, or economic connection to the audited company. Human capital refers to a company’s human resources, including its workforce and management. Gross margin measures the extent to which the selling price of sold inventory exceeds its cost. Economic value added represents the extent to which a return generated by management exceeds the cost of the capital invested to generate that return. Credit quality refers to the likelihood that an individual or entity will pay an outstanding account in a timely manner.